For the first time this year, there was a change to the Franklin International Equity Rotation model this week.

The Franklin FTSE China ETF (FLCH) was a holding within the Franklin model for around a year, gaining 18.2% over that span. However, the group has cooled off in recent months, seeing the FLCH’s fund score fall to a mediocre 3.61, in addition to falling into the bottom half of the model’s matrix. As a result, the fund was sold from the model. In its stead, the model is picking up the Franklin FTSE Brazil ETF (FLBR). Latin American equities have been one of the strongest areas of international equities, as well as the broader market. Within the Asset Class Group Scores page, Latin America currently holds the top position with an extremely robust average fund score of 5.48. FLBR holds a near-perfect fund score of 5.82, in addition to a sharply positive score direction of 3.64. At the end of January, the fund moved back to a buy signal and FLBR has also been trading in a positive trend dating back to March of last year. The fund also holds an extremely high yield of 6.50%. After the change, the model will rebalance its holdings back to equal weight. The model now has 20% exposure to Latin America, 20% in North America (FLCA), 20% in Europe (FLGR), and 40% in the Asia-Pacific region (FLKR & FLTW). The current model holdings are now as follows:

This section of the report categorizes select Franklin ETFs by their respective broad group. Along with each group, you can view the Average Group Score, which is an average of the scores of all funds represented in that particular group. Those Franklin ETFs that meet or exceed the Average Group Score will be highlighted in green in order to easily view those ETFs that have superior strength within their respective group. You want to focus on those ETFs that exhibit superior strength when looking to add new exposure to a particular group.

The distribution curve places each ETF on a bell curve according to their respective degrees of overbought or oversold status using a 10-week distribution. ETFs that are statistically oversold will appear on the left-hand side of the bell curve, while those that have become statistically overbought will appear on the right-hand side of the bell curve. Perhaps the most useful attribute of this feature is that it displays the entire universe on the curve at one time to give us a general picture of whether the Franklin ETF universe is generally overbought on a near-term basis, or generally oversold. Our best opportunities are to buy strong relative strength ETFs that have regressed back toward mean conditions based on market weakness, or have become oversold based upon extreme market weakness. Weekly Distribution is a short-term gauge that is most helpful in timing entry and exit points, while the longer-term information of trend and relative strength is a more controlling factor in the decision of whether to buy or sell.

Legend:

• UPPERCASE indicates that the RS chart is on a buy signal.
• lowercase indicates that the RS chart is in a sell signal.
• GREEN lettering indicates the ETFs trend chart is on a buy signal.
• RED lettering indicates the ETF is on a sell signal.
• Box Color indicates the Sector Status Rating. Green = Favored, Yellow = Average, and Red = Unfavored.

The Franklin LibertyShares International Model is designed to identify major country and regional themes in the international marketplace through the use of the Point & Figure relative strength tools. For more information on the portfolio construction and back testing, see the model info file on the models page.  (Note: The Franklin LibertyShares ETF Models will be updated Thursday mornings by 9:30 am EST) 

Weekly Changes: 

* - Dates prior to 09/01/2018, which is when the Franklin LibertyShares ETF Model became available on the NDW Research Platform, are representative of when the position was added to the backtested model.